Indian economy a bright spot in global landscape: IMF

Washington: India’s growth is set to rise to 7.2 percent in this fiscal with the economy reviving, helped by positive policy actions that have improved confidence and lower global oil prices, according to the IMF.

To continue on this trend, India needs to revitalise the investment cycle and accelerate structural reforms, says the International Monetary Fund (IMF) in its annual economic health check of the Indian economy.

“The Indian economy is the bright spot in the global landscape, becoming one of the fastest-growing big emerging market economies in the world,” it said in a report on what is technically called IMF executive board’s “Article IV consultations” with India on Feb 13.

“Growth numbers are now much higher and the current account deficit is comfortable, in part due to the fall in gold imports and lower oil prices,” said IMF Mission Chief for India Paul Cashin.

“New investment project announcements have started to pick up, particularly in the power and transport sectors.”

He also noted that bolstering financial sector health and further financial inclusion would support growth going forward.

While the country is well placed to cope with external shocks, there are possible risks on the horizon, both external and domestic, the IMF said.

“Spillovers from weak global growth and global financial market volatility could be disruptive, including from any unexpected developments as the United States begins to raise its interest rates,” Cashin said.

On the domestic front, the weaknesses in corporate balance sheets, “especially in light of the increase in corporate leverage of the past few years” and worsening bank asset quality bear watching as they could weigh on growth, the report said.

India’s economic profile recently got a lift as the country improved the way it measures economic output, IMF said, calling the new method “more consistent with international best practices”.

Based on the revised GDP, the IMF forecasts growth will strengthen to 7.2 percent in 2014-15 and rise to 7.5 percent in 2015-16, driven by stronger investments following improvements to the business climate.

Within the next 15 years, India will have the largest – and among the youngest – workforce in the world and will need to create jobs for the roughly 100 million young Indians who will enter the job market in the coming decade, the report said.

“Moving the economy forward in these directions will help India continue along the path toward a brighter economic picture of rapid economic growth and macroeconomic stability for many years to come,” Cashin said.